LONG-TERM DEBT |
9 Months Ended |
|---|---|
Sep. 30, 2011 | |
Convertible Debt |
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| LONG-TERM DEBT |
4. CONVERTIBLE
DEBT
On
January 25, 2010, Cellectar issued nine convertible promissory
notes (“Convertible Notes”) in an aggregate principal
amount of $2,720,985. The Convertible Notes provided for
interest of 12% compounded annually with a maturity date of the
earlier of (i) the date on which Cellectar’s cash reserves
fall below $250,000 or (ii) January 20, 2011. Upon an
event of default, as defined, the interest rate increased by 10% to
22%. The outstanding principal balance, together with
any unpaid interest, was convertible immediately, by the lender,
into common stock of the Company at $0.82987 per share (giving
effect to the Exchange Ratio). Furthermore, the
Convertible Notes were subject to an automatic conversion feature
equal to 70% of the per share price of a qualified financing,
should the Company complete a qualified financing transaction which
raises at least $20,000,000 in proceeds to the
Company. Since the Convertible Notes were convertible
into common stock at date of issuance at a per share price which
was less than the estimated fair value of the Company’s
common stock at that date, the Convertible Notes contained a
beneficial conversion feature (“BCF”). The
estimated intrinsic value of the BCF of $213,792 was determined as
the difference between the conversion price and the estimated fair
value of Cellectar common stock on the date of issuance, multiplied
by the 3,278,786 shares of common stock into which the Convertible
Notes were convertible at issuance. This amount was recorded as a
component of interest expense on the date of
issuance. The estimated per-share fair value of
Cellectar common stock was determined by management based on a
number of factors including an independent valuation, which was
determined to be the best indication of the fair value as of the
issuance date of the Convertible Notes. Since the
conversion price was subject to adjustment in the event of a
qualified transaction, as defined, the Convertible Notes also
contain a contingent beneficial conversion feature
(“CBCF”). This contingency did not
materialize; therefore no intrinsic value was allocated to the
CBCF.
On
January 20, 2011, the Convertible Notes matured but remained
unpaid. Following the maturity and default of the
Convertible Notes, the holders of the Convertible Notes agreed that
all of the outstanding notes would be automatically converted
simultaneous with the completion of an acquisition and financing
(the “Conversion Time”), if completed. The
amount of shares issued upon such conversion would be dependent on
whether a minimum investment was made by the note holders at the
Conversion Time and amounts were negotiated based on outstanding
principal and projected accrued interest based on an assumed
closing date for the acquisition and financing. Since
the number of shares to be issued upon conversion could not be
determined until the Conversion Time the Convertible Notes
contained a CBCF. On April 1, 2011, Cellectar’s
board of directors voted to accept the note holders consent to
convert the Convertible Notes into 4,181,535 shares of common stock
immediately prior to the Acquisition, which conversion occurred on
April 8, 2011. Upon conversion of the Convertible Notes,
the Company reclassified the aggregate outstanding principal and
interest totaling $3,184,707 to a component of additional paid-in
capital. The revised conversion terms resulted in the
issuance of an additional 343,963 shares of common stock over the
3,837,572 shares of common stock that would have been issued if the
unpaid principal and accrued interest on the Convertible Notes had
been converted on that date in accordance with their original terms
at the stated conversion price. At the Conversion Time,
the Company determined that the value of these additional shares
was $257,973, based on the $0.75 per share offering price of the
common stock sold in the private placement completed concurrently
with the Acquisition, which is the best indication of fair value on
that date. Since the final conversion terms were not
finalized until April 1, 2011 and the conversion was not completed
until April 8, 2011, the value of the additional shares of $257,973
was recorded as a component of interest expense in the second
quarter of 2011.
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Notes Payable |
|
| LONG-TERM DEBT |
5. LONG-TERM NOTES PAYABLE
On
January 11, 2008, Cellectar entered into a loan agreement with a
bank to borrow up to $1,200,000. The borrowing,
evidenced by a note (the “Bank Note”), bore interest at
a rate of 7.01% per annum, could be prepaid without penalty and was
payable in 48 monthly principal and interest payments of $20,520
with a balloon payment of any remaining unpaid principal and
interest on March 28, 2012. In the event of default of
payment, Cellectar would be required to pay a late charge equal to
5% of the delinquent payment and the interest rate on the unpaid
principal would be increased by 3%. The Bank Note was
collateralized by substantially all assets of Cellectar and a
deposit account in the amount of $500,000. On April 8,
2011, immediately prior to the Acquisition, the Company paid
$627,075 in full settlement of the Bank Note and the associated
restriction on cash was released. The payment was made
in order to avoid an event of default that would have occurred as a
result of the change of control that occurred at the time of the
Acquisition.
On
September 15, 2010, Cellectar entered into certain loan agreements
with the Wisconsin Department of Commerce (“WDOC
Notes”) to borrow a total of $450,000. The WDOC
Notes bear interest at 2% per annum beginning on the date of
disbursement and allow for the deferral of interest and principal
payments until April 30, 2015. In the event of default
of payment, interest on the delinquent payment is payable at a rate
equal to 12% per annum. Monthly payments of $20,665 for
principal and interest shall commence on May 1, 2015 and continue
for 23 equal installments with the final installment of any
remaining unpaid principal and interest due on April 1,
2017. As of September 30, 2011, $450,000 is classified
as a long-term note payable in the accompanying balance
sheet.
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